German aviation giant Lufthansa Group has slashed its financial forecast for the year following a disappointing performance in the second quarter.
The firm - which encompasses Germany's flagship Lufthansa Airlines and a number of subsidiaries - said on Friday that its bottom line fell on the back of lower ticket revenues, especially for travel to Asia.
In the second quarter, Lufthansa Airlines made a profit of only €213 million ($232 million), down from €515 million in the same period last year, the company announced in Frankfurt.
The group now has a loss of €427 million on its books for the first half of 2024. At the same stage in the previous year, it recorded a profit of €149 million.
The reasons given for the poor results were falling ticket revenues, inefficiencies and the slow delivery of new aircraft.
By contrast, the group's other passenger airlines, as well as Lufthansa Technik and Lufthansa Cargo, are expected to match the previous year's results.
For the year as a whole, the Lufthansa Group is now expecting an operating profit of between €1.4 billion to €1.8 billion, having previously given a target of around €2.2 billion.
In the second quarter, the group's adjusted earnings before interest and tax totalled €686 million, down from €1.1 billion in the same period last year.
"It is becoming increasingly challenging for Lufthansa Airlines to break even for the full year," the company said.
A savings programme has been launched at the core Lufthansa brand. Material costs are being cut by 20% across the board and a general freeze on staffing has been imposed in administration.
All non-essential projects are to be postponed, reduced or stopped in order to perhaps still break even by the end of the year.
Reaching the break-even point is "increasingly challenging," according to the mandatory disclosure issued to investors through the stock exchange on Friday.
The market for airline ticket sales has largely returned to normal following a boom in sales after the end of the coronavirus pandemic, Lufthansa boss Jens Ritter wrote in an internal letter seen by dpa.
At the same time, competitors are expanding services much faster than Lufthansa. As a result, profit per passenger for Lufthansa has been shrinking, even on normally lucrative long-haul flights to Asia or across the Atlantic.
Ritter went on to write: "We are experiencing a 'new reality': not a crisis, but a structural change," with a decline in business travellers that used to fill the airline's seats.
Tourists who pack planes for holidays don't keep up demand year-round, according to Ritter.
"With our current system, we have hardly any opportunities to compensate for such seasonal fluctuations," wrote Ritter.
According to the financial newspaper Handelsblatt, Lufthansa Group chief executive Carsten Spohr is alarmed: "Things are not going at all as we would like them to," he reportedly told employees.
Lufthansa Airlines is operating 20% fewer flights than before the pandemic, but has the same number of employees as in 2019, which means 20% less productivity, Handelsblatt quoted Spohr as saying.
The problems come at an inopportune time for Lufthansa. The acquisition of a major stake in the troubled Italian state airline ITA has only just been approved by EU regulators, and will need considerable management capacity in Rome and Frankfurt to complete in the fourth quarter as planned.
The deal will also require significant capital, which the Lufthansa Group's existing airlines are supposed to generate.
Most Popular
Comments / 0